{"id":32576,"date":"2022-02-13T17:09:20","date_gmt":"2022-02-13T17:09:20","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/the-bartram-pulley-company-bpc-must-decide-between-two-mutually\/"},"modified":"2022-02-13T17:09:20","modified_gmt":"2022-02-13T17:09:20","slug":"the-bartram-pulley-company-bpc-must-decide-between-two-mutually","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/the-bartram-pulley-company-bpc-must-decide-between-two-mutually\/","title":{"rendered":"The bartram-pulley company (bpc) must decide between two mutually"},"content":{"rendered":"<div>\n<p>The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions:<\/p>\n<p>\u00a0<\/p>\n<table>\n<tbody>\n<tr>\n<td colspan=\"2\">\n<p>Project A<\/p>\n<p>\u00a0<\/p>\n<\/td>\n<td colspan=\"2\">\n<p>Project B<\/p>\n<p>\u00a0<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p>Probability<\/p>\n<\/td>\n<td>\n<p>Net Cash Flows<\/p>\n<p>\u00a0<\/p>\n<\/td>\n<td>\n<p>Probability<\/p>\n<\/td>\n<td>\n<p>Net Cash Flows<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p>0.2$6,000<\/p>\n<\/td>\n<td>\n<p>$6,000<\/p>\n<\/td>\n<td>\n<p>0.2<\/p>\n<\/td>\n<td>\n<p>$ 0<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p>0.6<\/p>\n<\/td>\n<td>\n<p>6750<\/p>\n<\/td>\n<td>\n<p>0.6<\/p>\n<\/td>\n<td>\n<p>6,750<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p>0.27,500<\/p>\n<\/td>\n<td>\n<p>7,500<\/p>\n<\/td>\n<td>\n<p>0.2<\/p>\n<\/td>\n<td>\n<p>18,000<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>BPC has decided to evaluate the riskier project at a 12 percent rate and the less risky project at a 10 percent rate.<\/p>\n<p>a. What is the expected value of the annual net cash flows from each project? What is the coefficient of variation (CV)? (Hint: sB = $5,798 and CV\u00a0<sub>B<\/sub>\u00a00.76.)<\/p>\n<p>b. What is the risk-adjusted NPV of each project?<\/p>\n<p>c. If it were known that Project B was negatively correlated with other cash flows of the firm whereas Project A was positively correlated, how would this knowledge affect the decision? If Project B&#8221;s cash flows were negatively correlated with gross domestic product (GDP), would that influence your assessment of its risk?<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions: \u00a0 Project A \u00a0 Project B \u00a0 Probability Net [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-32576","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/32576","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=32576"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/32576\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=32576"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=32576"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=32576"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}